A. Field of the Invention
The present invention relates generally to the field of funds and/or credit transfers and, more particularly, to funds and/or credit line transfers between credit card accounts.
B. Description of the Related Art
People exchange money using a variety of methods. For example, in lieu of paying cash for goods and services, people often choose to pay for such purchases using credit cards or checks. In a typical credit card transaction, a merchant calculates the amount of a purchase and asks the buyer for payment. The buyer then presents the merchant with a credit card. The merchant runs the credit card through a point of sale unit with the amount of the sale entered either manually or automatically by a cash register. Once entered, the merchant's acquiring bank, or credit card processor, receives the credit card data and sales amount with a request for authorization of the sale. The credit card data includes the credit card number, which identifies the type of card, the issuing bank, and the cardholder's account.
After processing the transaction, the acquiring bank routes an authorization request to the buyer's credit card issuing bank. If the cardholder has enough credit to cover the sale, the issuing bank authorizes the transaction and generates an authorization code. The issuing bank sends this code to the acquiring bank and puts a hold on the cardholder's account for the amount of the sale. Based on the code received from the issuing bank, the acquiring bank sends an approval or denial code to the merchant's point of sale unit, which has a separate terminal identification number to enable credit card processors to route data back to the particular unit. The point of sale unit or cash register then prints out a sales draft or slip to be signed by the buyer, which obligates the buyer to reimburse the card-issuing bank for the amount of the sale.
At a later time, generally the end of the day, the merchant reviews all authorizations stored in the point of sale unit against the signed sales drafts. When all the credit card authorizations have been verified to match all the actual sales drafts, the merchant captures, or transmits, the data on each authorized credit card transaction to the acquiring bank for deposit. This action is in lieu of depositing the actual signed paper drafts with the bank.
The acquiring bank performs an interchange for each sales draft with the appropriate card-issuing bank. The card-issuing bank transfers the amount of the sales draft to the acquiring bank, minus an interchange fee, which is typically between 2-4% of the transaction value. The acquiring bank then deposits the amount of all the sales drafts submitted by the merchant, less a discount fee, into the merchant's bank account.
To confirm validity of a credit card, the issuing bank reviews the credit card account number using a checksum algorithm that prevents others from creating valid account numbers. For example, a standard Visa or MasterCard account number is 16 digits and the algorithm reduces the probability of someone fraudulently creating a valid number to approximately 1 in 500,000.
Due to the perceived risk of fraud and the potential for monetary loss, most consumers prefer not to provide credit card account numbers to another person, particularly when the consumer has no way of knowing the identity or trustworthiness of the recipient of this information. Many consumers thus hesitate to use a credit card for telephone orders, such as catalog orders, for fear that some catalog company operators may misuse their card number.
Credit card institutions also offer so-called "convenience checks." Convenience checks can be used to purchase goods and services in the same manner as a conventional check, except that the convenience check clears against the cardholder's available credit line. The convenience check amount is generally recorded as a cash advance on the cardholder's monthly billing statement.
Credit cards today have become a pervasive method of payment for goods and services. They not only offer convenience, security, and flexibility in the commercial transaction process, but also provide some limited flexibility in the assignment of debt obligation. For example, it is well known in the art that credit card holders are free to transfer debt between accounts, thereby taking advantage of different account features, such as lower interest rates. Such transfers are typically done by paying off the old account with a convenience check or electronic funds transfer, which draws the old account balance onto the new credit card account.
Credit card companies also offer limited-use credit cards that permit employees to charge debt against a company account. For example, when relocating employees, some companies pay relocation expenses by issuing a credit card on the company's account with a predetermined credit limit for the card. The employee may use the card for purchases and cash advances up to the limit. The corporation maintains liability for the account debt, thus essentially taking the responsibility of paying the relocation expenses.
Credit card companies also offer co-signed accounts and accounts with multiple, or supplemental, cards. With co-signed accounts, a co-signer assumes direct liability for any credit card debt reneged on by the principal cardholder. Supplemental card systems permit a principal account owner to provide cards issued on the same account to other family members. The principal account owner maintains liability for all debt accrued by the other users. Similar to supplemental cards, corporate cards provide employees with access to a corporate credit line and the corporation maintains liability for all debt accrued by the employees.
For the limited-use, co-signed, supplemental, and corporate credit card accounts, unused available credit line represents a level of risk exposure by the party liable for the debt. For example, available credit could be misused by the employee or by a thief if the card is lost or stolen. In fact, many corporate cards have higher risk exposure than consumer cards, in part because many state and federal laws limiting liability apply to consumer-issued cards, but not to corporate-issued cards.
Besides credit cards, another widely-used payment method involves the use of personal checks. Consumers use personal checks to settle debts, pay bills, or make a variety of purchases. In general, banks issue personal checks to consumers following the establishment of an account with the bank. The bank, however, typically requires that consumers have sufficient funds in their accounts to cover all payments made using personal checks.
Banks also provide consumers with the option of using "certified checks" or "bank checks" as a payment method. With a certified check, a bank prints special indicia on a personal check that verifies that the bank has segregated sufficient funds in the consumer's account to cover the value of the check. The bank will not release those funds to anyone other than the check's presenter except under narrow and defined circumstances, e.g., proof that the check was destroyed or lost. Certified checks provide the transferee with a high degree of confidence that the check can be cashed for the value stated on its face.
Bank checks are drawn on the bank's own account instead of a consumer's account. It is made out to a transferee specified by the party who paid the bank in advance for the value of the check. Unlike certified checks that are returned to the transferor after being cashed, bank checks are returned to the bank because they are drawn on the bank's own account. Bank checks can be used, for example, when the issuing party does not want to reveal his identity, or when the receiving party wants to minimize the chance of revocability.
Another method of transferring money involves the use of money orders. A money order is very similar to a bank check except that it is issued by a non-bank party such as a post office. Alternatively, people transfer funds by "wiring" money. To wire money, a consumer pays a fee and prepays a third-party to instruct a distant party to disburse an amount of money (usually cash) to a specified person. Electronic funds transfer (EFT) offers yet another method for parties to transfer money. EFT involves securely moving money from one account directly to another electronically.
These methods for exchanging or transferring money suffer from a number of shortcomings. For instance, not one of these conventional methods permits a direct exchange of credit where the credit card of the transferor is debited while the credit card of the transferee is credited in settlement of the transferor's debt to the transferee.
Even if the transferor uses a convenience check in settlement of the debt, the non-merchant transferee has no way to know whether the transferor has sufficient credit available to cover the value of the check. Also, even if the transferee could know that sufficient credit was available at the time the check was presented, the available credit could be fully or partially used by the transferor before the check is processed.
Another shortcoming of conventional payment schemes is that, except for cash, there is no way for one person to pay another person so that the transferee is able to use the value transferred without first processing the transfer instrument by, for example, depositing the instrument with a bank or converting it into cash. In other words, the recipient of a check must convert the check into cash or deposit the check in a bank account before withdrawing cash or writing checks against the transferred value.
There are some narrowly usable instruments such as gift certificates or casino chips which are bearer instruments of value, and thus do not require conversion prior to use. These instruments, however, are denominated in specified amounts and are not widely usable like cash or a credit card. This same limitation holds true for bank checks, certified checks and money orders. Only wiring money to another party allows the recipient to receive cash immediately, though he must first travel to a location where an agent of the wiring process is available to disburse funds.
Another shortcoming, particularly with respect to credit cards, is that a cardholder's unused credit line has no resalable value. In a strict financial sense, unused credit capacity is an economic asset (borrowing capability) that has value, particularly if the unused money is below current market rates. For example, if a consumer has a $5,000 credit line on his credit card at an introductory rate of 6%, the consumer might desire to use $1,000 of the line himself and use the other $4,000 of the line to relend to another borrower at an interest rate higher than 6%, keeping the interest rate differential as a profit. However, currently there is no way for a cardholder to use his unused credit line as a revenue generating asset because the credit line is irrevocably assigned to a given card and cannot be transferred in any way.
In addition, with respect to limited-use, co-signed, supplemental, and corporate credit card accounts, there is no way for the party liable for the debt, such as a company, to enable a cardholder, such as an employee, to increase or decrease credit available on a given credit card as needed and authorized by the company. Also, there is no way for an individual to assign part of his available credit line to another card for specific reasons.